Frank vows to fight for tough derivatives rules in Dodd-Frank

A leading House Democrat said Monday that GOP lawmakers are trying to advance bills that would undo key aspects of the Dodd-Frank financial reform law.

In a lengthy statement issued Monday, Rep. Barney Frank (D-Mass.) accused Republicans of trying to weaken a section of the reform law bearing his name that applies to one of the "major causes" of the financial meltdown: derivatives.

While the financial tool does allow companies to legitimately protect themselves against price swings, "unregulated, irresponsible" derivatives deals played a key role in the financial meltdown, Frank said.

Dodd-Frank aimed to better regulate those products, but he warned that a pair of bills being pushed in the House, if not properly amended, would "re-deregulate" derivatives and reestablish them as a threat to the economy.

The ranking member of the House Financial Services Committee maintained that Democrats were not inherently opposed to changes to the Wall Street overhaul. Rather, he said members of his party saw the merit in "fine-tuning" legislation to reassure businesses, so long as the proposed tweaks did not simply become "routes to a return to the excesses of the recent past."

But these two bills go far beyond tweaks and threaten to undercut needed curbs, he argued. The bills are set to hit the House floor when lawmakers return at the end of April, and if the Republican majority is not open to the changes Frank seeks, he said House Democrats will work to defeat the measures and push the Senate and White House to block them.

In particular, Frank is taking issue with one bill that would block regulators from regulating derivative transactions involving foreign subsidiaries of U.S. institutions. During a committee markup of the bill, Frank offered an amendment that would allow regulators to oversee those transactions if they were deemed to pose a risk to the financial system. His amendment was voted down in a party line vote, and the final bill actually garnered support from nine Democrats as the committee approved it.

The second bill would prevent regulators from forcing the prices of derivatives to be publicly disclosed on exchanges in a similar fashion to stocks. Republicans maintain that regulators should not force such continuous pricing data on products that may not trade often, but Frank maintained the bill eliminates much-needed price transparency from a traditionally opaque market.

"They would return significant derivatives activities to the days when they were conducted in secret," he said.

Frank's push comes roughly one week after the House cleared, with broad bipartisan support, a trio of Dodd-Frank tweaks, two involving derivatives and the third a technical fix to the new Consumer Financial Protection Bureau. It is not clear yet whether the Senate plans to take them up, or if the White House would be willing to sign them into law.